Virtual Conversation on Virtual Legality

I agree with attorney Victor Cosentino (March Commentary) that E-mail contracts would be easy to fake. However, everyday voice-phone transactions are made and memorialized, if at all, on scrawled bits of paper with the potential of being ambiguous and self-serving. Yet the vast majority of oral contracts follow through to mutually successful conclusions because most people are in business not only to make money but to stay in business. That depends on a reputation for keeping your word and delivering acceptable quality. Consentino's specific advice, "E-mail should not be used to create a contract" is just backward and unhelpful. He could have been more helpful by telling people how to structure E-mail transactions, so problems of proof and payment can be avoided.

Jim Upchurch

Montgomery, AL

Ma ny of the points you raise are correct; nevertheless, I stand by what I said. Voice phone is a good way to initiate and negotiate contracts, but when a contract involves the sale of goods valued at more than $500, most states have laws specifically stating that such contracts must be in writing and signed in order for them to be enforceable. The bottom line is that as a businessperson, you need to know the risks inherent in the way you run your business, including the possibility that someone might stiff you on an E-mail contract that is not enforceable in court.

--Victor Cosentino

In "Virtual Legality," Victor Cosentino concludes that a contract formed through the exchange of E-mail, without a cryptographic "digital signature" is probably not legally enforceable. With all professional respect, I disagree. First, although the statute of frauds requires certain contracts to be "signed," the law generally understands that word to be flexible. The law does not require that symbol to be secure against f orgery, and many courts have held that simple telegrams are signed. Second, to enforce an E-mail message, you must prove its origin, but that does not necessarily require a digital signature. A famous example occurred in the Iran-contra trial of Admiral John Poindexter. In none of these cases was the message in question authenticated with a digital signature but rather on the basis of a log-on password used to send the message and, more important, the facts and circumstances of the case (e.g., testimony from a witness: "He told me he was going to send me E-mail, and then I received this message..."). Readers should, of course, consult their own lawyers.

Benjamin Wright

Author of The Law of Electronic

Commerce: EDI, Fax, and E-mail

(Little, Brown and Company, 1992)

Dallas, TX

Recognizing Wright's expertise in the field, I maintain that E-mail agreements (within the statute of frauds) are probably unenforceable in court. Although the court does interpret "signed" broadly, it would be a great mistake to accept the "from" field in plain-text E-mail as a signature. Taken out of the network, an E-mail message is just editable text, easily fabricated. The comparison to telegrams seems inappropriate. Telegrams are relatively trustworthy, because individuals must go through an intermediary that delivers a fairly unalterable hard copy to the recipient. And the Poindexter case involved multiple messages sent over a long period of time rather than just those necessary to make an offer and acceptance. Furthermore, those messages were sent and received within a government communications network designed for top federal administrative officials rather than the anarchic Internet whose standards are designed to support the lowest common denominator. Also, in that case, the E-mail message was not considered under the strict sense of the statute of fraud. The gist of my article was the presence of unquantified and unidentified risk of which users may not be aware. Perhaps, the risk is quite small. However, unless the potential loss is also small, contracting by E-mail is a risk I advise my clients not to take.

--Victor Cosentino